De minimis ‘annual test’ and a partly exempt business
One of my clients is an independent financial adviser and partially exempt for VAT purposes. In the tax year ended 31 March 2026, he was de minimis and we continued the de minimis outcome for the current tax year based on the ‘annual test’ concession allowed by HMRC when we completed his June 2026 return.
The problem is that my client spent £40,000 plus VAT on new software in April 2026, which wholly relates to his mortgage activities, where his commission is exempt from VAT. On this basis, the £8,000 of input tax means he cannot be de minimis for the tax year ended 31 March 2027 because £8,000 exceeds £7,500. Does this mean that we were wrong to claim input tax of £8,000 on his June 2026 return when we completed it and we must now do quarter by quarter de minimis tests?
On a separate issue, a colleague has suggested that it would be sensible to ask the software supplier if a small addition to the capabilities of the software could be made so that there is also a potential use for the taxable activities of the business, so that the input tax would move from exempt to residual as far as partial exemption is concerned. My feeling is that the horse has already bolted on this issue, which should have been considered before it was purchased. What do readers think?
Query 20,783 – Bolton Bolter.
To opt or not to opt
One of my farmer clients engaged a builder to build an office on the farm for £300,000 plus VAT. The work started in June 2026 and was completed by the end of August 2026. Three invoices were issued, each for £100,000 plus VAT, in June 2026, July 2026 and August 2026. The farmer submits monthly VAT returns and has claimed 100% of the VAT back. After starting to use the office on 1 September 2026, the farmer was approached by a company that specialises in providing loan finance to farmers. It would like to occupy the entire building from January 2027 for an annual rent of £30,000, or £25,000 plus VAT if the farmer opts to tax it. The farmer has decided to accept the offer but has asked for advice regarding whether to opt to tax the building. Are there any capital goods scheme issues to consider?
Query 20,784 – Giles.
Changing places
For the first time in a long time, three of my clients – husband, wife and their company – have moved house. I have filled in five online forms for Companies House (two PSCs, two directors, one registered office) and also some more forms for other directorships held by the husband. I am now trying to work out what I need to tell HMRC, and when. The website says ‘you should tell HMRC when you change address’, but it is not obvious how. For example, if I go to my agent account and call up the company’s record, there is a button for ‘change company address’. This then leads to the following message: ‘Any changes to your company address must be notified to Companies House. If the change is associated with a change of name, once Companies House has made the changes, HM Revenue & Customs should update your records within 14 days.’
What does that mean? As I have told Companies House, do I need to do anything else? The change is not associated with a change of name. There isn’t even a button on the self-assessment pages. Is this something the clients have to do themselves, and if so, what is the best way of going about it?
Lastly, if I tell HMRC once for the company, does that cover corporation tax, VAT and PAYE – can I rely on the systems being joined up?
Query 20,785 – Nomad.
So long, and thanks for all the fish
Our client is a small private company employing some 15 people. The sole shareholder/director has built it up over many years and has had the same invaluable PA/administrator throughout that period. She is now aged 63 and has decided to retire. The owner wants to mark her retirement with a substantial payment (say £25,000) as a thank you for everything that she has done.
He has asked me whether this can be paid tax-free, either by him personally or by the company. I have said that if he makes the payment himself as a personal gesture of friendship, preferably not directly on her retirement (eg not at her leaving do), there is an argument that the payment will not be taxable income in her hands.
If the company pays it, there seems little possibility that it can be paid tax-free. It will either be earnings or treated as an employer-financed retirement benefits scheme (EFRBS), as these take priority over the termination payments legislation. Presumably the company could make a contribution to her personal pension scheme. As she is 63, she could draw down at least part of this tax-free.
This situation can’t be that uncommon. What would readers recommend as the most tax-efficient way of going about this?
Query 20,786 – Dolphin.
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